Indirect Taxation
Customs
Law
Basic Concepts
Introduction
Entry 83 of the Union List of the Seventh Schedule to the Constitution
of India is empowered to levy the customs duty by the Central Government of
India.
The Customs Act, was enacted by the Parliament in the
year 1962, as per the List I of the Union List Parliament has an exclusive
right to make laws. The Customs Act regulates import and export, protecting the
Indigenous industry from other countries and so on. The Central Government of
India has power to make rules under section 156 of Customs Act, 1962, and also
has the power to issue Notifications from time to time for the purpose of
smooth functioning and effective administration of the Act.
As per section 157 of the Custom Act, 1962, the Central Board of Excise
and Customs (CBE&C), now renamed to Central Board of Indirect Tax and Customs (CBIC), has been empowered to make
regulations, consistent with provisions of the Act. The Commissioner of Customs
has the power to issue the Public notices which are also called trade notices.
With effect from 29.3.2018 “Central Board of Excise and Customs”, the
words “Central Board of Indirect Taxes and Customs” shall be substituted;
Bill
of Entry [Section 46]
The importer of
any goods, other than goods intended for transit or transhipment, shall make
entry thereof by presenting electronically on the customs automated system to
the proper officer a ‘bill of entry’
for home consumption or warehousing in such form and manner as
may be prescribed:
Provided that the Principal
Commissioner of Customs or Commissioner of Customs may, in cases where it is
not feasible to make entry by presenting electronically on the customs
automated system, allow an entry to be presented in any other manner.
A bill of entry
shall include all the goods mentioned in the bill of lading or other receipt
given by the carrier to the consignor.
The importer
shall present the bill of entry before the end of the next
day following the day (excluding holidays) on which the aircraft or vessel or
vehicle carrying the goods arrives at a customs station at which such goods are
to be cleared for home consumption or warehousing:
Provided that a bill of
entry may be presented at any time not exceeding thirty days prior to the expected
arrival of the aircraft or vessel or vehicle by which the goods have been
shipped for importation into India:
Provided
further that where the bill of entry is not presented within the
time so specified and the proper officer is satisfied that there was no
sufficient cause for such delay, the importer shall pay such charges for late
presentation of the bill of entry as may be prescribed.
The importer
while presenting a bill of entry shall make and subscribe to a declaration as
to the truth of the contents of such bill of entry and shall, in support of
such declaration, produce to the proper officer the invoice, if any, and such
other documents relating to the imported goods as may be prescribed.
The importer
who presents a bill of entry shall ensure the following, namely:—
(a)
The accuracy and completeness of the information given
therein;
(b)
The authenticity and validity of any document
supporting it; and
(c)
Compliance with the restriction or prohibition, if
any, relating to the goods under this Act or under any other law for the time
being in force.
If the proper
officer is satisfied that the interests of revenue are not prejudicially
affected and that there was no fraudulent intention, he may permit substitution
of a bill of entry for home consumption for a bill of entry for warehousing or vice versa.
Ex-Bond
Bill of Entry [Section 68]
Any warehoused
goods may be cleared from the warehouse for home consumption, if—
(a)
A bill of entry for home consumption in respect of
such goods (known as Ex-Bond Bill of Entry or Sub-Bill
of Entry) has been presented in the prescribed form;
(b)
The import duty, interest, fine and penalties payable
in respect of such goods have been paid; and
(c)
An order for clearance of such goods for home
consumption has been made by the proper officer:
Provided that the order
referred to in clause (c) may also be made electronically through the customs
automated system on the basis of risk evaluation through appropriate selection criteria:
Provided further that the owner of
any warehoused goods may, at any time before an order for clearance of goods
for home consumption has been made in respect of such goods, relinquish his
title to the goods upon payment of penalties that may be payable in respect of the
goods and upon such relinquishment, he shall not be liable to pay duty thereon:
Provided also that the owner of
any such warehoused goods shall not be allowed to relinquish his title to such
goods regarding which an offence appears to has had been committed under this
Act or any other law for the time being in force.
Shipping Bill/Bill of Export [Section 50]
The exporter of
any goods shall make entry thereof by presenting electronically on the customs
automated system to the proper officer in the case of goods to be exported in a
vessel or aircraft, a shipping bill,
and in the case of goods to be exported by land, a bill
of export in such form and manner as may be prescribed:
Provided that the Principal
Commissioner of Customs or Commissioner of Customs may, in cases where it is
not feasible to make entry by presenting electronically on the customs
automated system, allow an entry to be presented in any other manner.
The exporter of
any goods, while presenting a shipping bill or bill of export, shall make and
subscribe to a declaration as to the truth of its contents.
The exporter
who presents a shipping bill or bill of export shall ensure the following,
namely:—
(a)
The accuracy and completeness of the information given
therein;
(b)
The authenticity and validity of any document
supporting it; and
(c)
Compliance with the restriction or prohibition, if
any, relating to the goods under this Act or under any other law for the time
being in force.
Four important dates
1. Relevant
date for appropriate rate of import duty u/s 15:
IN CASE OF GOODS ENTERED
FOR HOME CONSUMPTION U/S 46:
(a)
Date of submission of a bill of entry for home
consumption, or
(b)
Date
of entry inwards of the vessel, or the arrival of the aircraft or the vehicle
by which the goods are imported, whichever is later.
IN CASE OF WAREHOUSED GOODS CLEARED FOR HOME
CONSUMPTION U/S 68:
(a) Date of submission of a bill of
entry for clearing the goods from warehouse, or
(b) Date of entry inwards of the vessel, or
the arrival of the aircraft or the vehicle by which the goods are imported, whichever is later.
IN
ANY OTHER CASE:
Date on which duty is paid
2. Relevant
date for appropriate exchange rate for computing import duty u/s 14:
Date on which a bill of entry (for home consumption or for warehousing)
is presented by the importer u/s 46
3. Relevant
date for appropriate rate of export duty u/s 16:
IN CASE OF GOODS ENTERED
FOR EXPORT U/S 50:
Date on which the proper officer makes an order permitting clearance and
loading of the goods for exportation u/s 51
IN
ANY OTHER CASE:
Date on which duty is paid
4. Relevant
date for appropriate exchange rate for computing export duty u/s 14:
Date on which a shipping bill or a bill of export, as the case may be,
is presented by the exporter u/s 50
Abatement
of duty on damaged or deteriorated goods [Section 22]
1.
Where it is shown to the satisfaction of the Assistant
Commissioner of Customs or Deputy Commissioner of Customs –
(a) That any
imported goods had been damaged or had deteriorated at any time before or
during the unloading of the goods in India; or
(b) That any
imported goods, other than warehoused goods, had been damaged at any time after
the unloading thereof in India but before their examination, on account of any accident
not due to any wilful act, negligence or default of the importer, his employee
or agent; or
(c) That any warehoused goods had been damaged at
any time before clearance for home consumption on account of any accident not
due to any wilful act, negligence or default of the owner, his employee or
agent,
Such goods
shall be chargeable to duty in accordance with the provisions of sub-section (2)
of this section.
2.
The duty to be charged on the goods referred to in
sub-section (1) shall bear the same proportion to the duty chargeable on
the goods before the damage or deterioration which the value of the damaged or deteriorated
goods bears to the value of the goods before the damage or deterioration.
Mathematically,
|
Duty on damaged
goods = |
|
Duty on goods
before damage × [(Value of damaged or deteriorated goods) ÷ (Value of goods
before damage or deterioration)] |
3.
For the purposes of this section, the value of damaged
or deteriorated goods may be ascertained by either of the following methods at
the option of the owner:–
(a)
The value of such goods may be ascertained by the
proper officer, or
(b)
Such goods may be sold by the proper officer by public
auction or by tender, or with the consent of the owner in any other manner, and
the gross sale proceeds shall be deemed to be the value of such goods.
Remission
of duty on lost, destroyed or abandoned goods [Section 23]
1.
Where it is shown to the satisfaction of the Assistant
Commissioner of Customs or Deputy Commissioner of Customs that any imported
goods have been lost otherwise than as a result of pilferage or destroyed, at
any time before clearance for home consumption, the Assistant Commissioner of
Customs or Deputy Commissioner of Customs shall remit the duty on such goods.
2.
The owner of any imported goods may, at any time
before an order for clearance of goods for home consumption under section 47 or
an order for permitting the deposit of goods in a warehouse under section 60
has been made, relinquish his title to the goods and thereupon he shall not be
liable to pay the duty thereon:
Provided that the owner of any such imported goods shall not be
allowed to relinquish his title to such goods regarding which an offence appears
to have been committed under this Act or any other law for the time being in
force.
Duty
on pilfered goods [Section 13]
If any imported
goods are pilfered after the unloading thereof and before the proper officer
has made an order for clearance for home consumption or deposit in a warehouse,
the importer shall not be liable to pay the duty leviable on such goods except
where such goods are restored to the importer after pilferage.
Example showing
how Customs Duty is computed:
Suppose Assessable Value (A.V.) of import including
landing charges = Rs 100
Basic Customs Duty (BCD) –
10%
IGST – 12%
Social Welfare Surcharge –
10%
In view of the above parameters, the calculation of
total customs duty would be as below:
|
|
Particulars |
Rs |
|
(i) |
Assessable
value |
100 |
|
(ii) |
Basic Customs
Duty [(i) × 10%] |
10 |
|
(iii) |
Social
Welfare Charge [(ii) × 10%] |
1 |
|
(iv) |
Transaction
value [(i) + (ii) + (iii)] |
111 |
|
(v) |
IGST [(iv) ×
12%] |
13.32 |
|
(vi) |
Total Customs
Duty [(ii) + (iii) + (v)] |
24.32 |
|
(vii) |
Total Cost [(i)
+ (vi)] |
124.32 |
Important note:
1. If
the goods are Gold or silver, including that plated with platinum or in
semi-manufactured form or in powder form, Social Welfare Surcharge is to be
calculated @3%.
2. Export
duty does not carry Social Welfare Surcharge.
Indirect Taxation
Customs
Law – Basic Concepts
Selected Problems and Solutions
Illustration: 1
|
An importer imported some goods for
subsequent sale in India at $ 10,000 on assessable value basis. Relevant
exchange rate and rate of duty are as follows: |
|||
|
Particulars |
Date |
Exchange rate
declared by the CBIC |
Rate of Basic
Customs Duty |
|
Date of submission of bill of entry |
25 Feb, 2018 |
Rs 58/USD |
10% |
|
Date of entry inwards granted to the vessel |
5 March, 2018 |
Rs 58.75/USD |
12% |
|
Calculate Assessable value and Customs Duty
in Indian rupees? |
|||
Solution: 1
Relevant
exchange rate is the rate prevailing on the date of submission of bill of
entry, i.e. on 25.02.18.
Therefore, in
this case, relevant exchange rate is: Rs 58/$
Relevant rate
of import duty is the rate prevailing on the
(a)
Date of
submission of bill of entry, or
(b)
Date of entry
inwards granted to the vessel, whichever is later.
Therefore, in
this case, the relevant rate of import duty is 12%.
Computation of Assessable Value and Total
Customs Duty in INR
|
|
Particulars |
Rs |
|
(i) |
Assessable
value [$ 10,000 × Rs 58] |
5,80,000 |
|
(ii) |
Import duty
[(i) × 12%] |
69,600 |
|
(iii) |
Social Welfare
Charge [(ii) × 10%] |
6,960 |
|
(iv) |
Transaction Value [(i) +
(ii) + (iii)] |
6,56,560 |
|
(v) |
IGST [(iv) ×
18%] |
1,18,181 |
|
(vi) |
Total Customs
Duty [(ii) + (iii) + (v)] |
1,94,741 |
Note: IGST Rate
has been assumed to be 18%.
Illustration: 2
|
An importer imported some goods. Entry
inwards granted to the vessel on 7th February, and the goods were cleared
from Chennai port for warehousing on 8th February, after assessment. The Bill
of Entry was presented on 1st February for warehousing. Assessable value was
US $ 10,000. Assume that no additional duty is payable. The goods were
warehoused at Chennai and were cleared from Chennai warehouse on 4th March.
What is the duty payable while removing the goods from Chennai warehouse on
4th March? Exchange rates and rate of Customs Duties are as follows: |
|||
|
Particulars |
Date |
Exchange rate
declared by the CBIC |
Basic Customs
Duty |
|
Date of submission of bill of entry for
warehousing |
1st February |
Rs 55/USD |
10% |
|
Date of entry inwards granted to the vessel |
7th February |
Rs 59/USD |
15% |
|
Date of clearance of goods from warehouse |
4th March |
Rs 60/USD |
12% |
Solution: 2
Relevant
exchange rate is the rate prevailing on the date of submission of bill of
entry, i.e. on the 1st February.
Therefore, in
this case, relevant exchange rate is: Rs 55/$
Relevant rate
of import duty is the rate prevailing on the
(a)
Date of submission of sub-bill of entry for clearing
the goods from warehouse, or
(b)
Date of entry inwards granted to the vessel, whichever
is later.
Therefore, in this
case, the relevant rate of import duty is 12%.
Computation of Assessable Value and Total
Customs Duty in INR
|
|
Particulars |
Rs |
|
(i) |
Assessable
value [$ 10,000 × Rs 55] |
5,50,000 |
|
(ii) |
Import duty
[(i) × 12%] |
66,000 |
|
(iii) |
Social
Welfare Charge [(ii) × 10%] |
6,600 |
|
(iv) |
Transaction Value [(i) +
(ii) + (iii)] |
6,22,600 |
|
(v) |
IGST [(iv) ×
18%] |
1,12,068 |
|
(vi) |
Total Customs
Duty [(ii) + (iii) + (v)] |
1,84,668 |
Note: IGST Rate
has been assumed to be 18%.
Illustration: 3
Compute
export duty from the following data:
(i).
FOB
price of goods: US $ 1,00,000
(ii).
Shipping
bill presented electronically on 28-02-2018
(iii).
Proper
officer passed order permitting clearance and loading of goods for export on 01-03-2018.
(iv).
Rate
of exchange and rate of export duty are as under
|
Date |
Rate
of Exchange |
Rate of Export Duty |
|
On 28-02-2018 |
1 US $ = Rs 65 |
10% |
|
On 01-03-2018 |
1 US $ = Rs 66 |
8% |
Rate
of exchange is notified for export by Central Board of Excise and Customs (Make
suitable assumptions wherever required and show the workings)
Solution: 3
Relevant
exchange rate is the rate prevailing on the date of
submission of shipping bill by the exporter i.e. on 28.02.2018. Therefore, in
this case, the relevant exchange rate is: Rs 65/$
Relevant rate of export duty is
the rate prevailing on the date on which the entry outwards is granted for export
and loading of goods taken place. Therefore, in this case, the relevant rate of
import duty is 8%.
Computation of FOB Value and Customs Duty
(i.e. Export Duty) in INR
|
|
Particulars |
Amount |
|
(i) |
FOB value in USD |
1,00,000 |
|
(ii) |
FOB value in
INR [$ 1,00,000 × Rs 65] |
65,00,000 |
|
(iii) |
Customs Duty
in INR [Rs 65,00,000 × 8%] |
5,20,000 |
Illustration: 4
One
Mr. A imported an Air Conditioner on 1st January 2018 for Rs 5, 00,000 from
USA. Mr. A has paid import duty for Rs 50,000. Due to some technical problems
the same was exported for want of repairs on 31st January 2018. After incurring
some additional cost for repairs and replacement worth for Rs 1, 00,000, the
same was re-imported on 5th February 2018.
Compute
the amount of customs duty payable on re-import of the Air Conditioner after repairs.
The ownership of the Air Conditioner has not been changed during the period.
Solution: 4
Re-imported private personal property, which was
imported earlier but exported out for any alteration, renovation, repair free of charge etc. is exempt from
duty subject to the condition that the goods
are repaired on free of charge basis in accordance with the terms of warranty given by the manufacturers and in accordance with the
established trade practice and Drawback or
other incentives have not been availed. However, certain Custom duties equivalent to the cost of alterations / renovations / additions /
repairs, if any, are payable.
[Refer Notification No.174/66-Cus. dated 24-9-1966] as
amended vide Notification 44/2017-Cus dated 30.06.2017
In view of above, in this case, the amount of customs
duty payable on re-import of the Air Conditioner after repairs is Rs 1, 00,000.
Illustration: 5
A machine was originally imported from Japan
at Rs 250 lakh in August 2017 on payment of all duties of customs. The said
machine was exported (sent-back) to supplier for repairs in January 2018 and
re-imported without any re-manufacturing or re-processing in October, 2018
after repairs. Since the machine was under warranty period, the repairs were
carried out free of cost.
However, the fair cost of repairs carried out
(including cost of material Rs 6 lakh) would have been Rs 9 lakh. Actual
insurance and freight charges (to and fro) were Rs 3 lakh. The rate of basic
customs duty is 10% and rate of IGST in India on like article is 12%.
Compute
the amount of customs duty payable (if any) on re-import of the machine after repairs.
The ownership of the machine has not been changed during the period.
Solution: 5
Computation
of total customs duty
|
Particulars |
Rs |
|
Assessable Value of goods re-imported after
exports [cost of repairs + cost of materials used for repairs + cost of
freight and insurance (to and fro)] [3 L + 6 L + 3 L] (A) |
12,00,000 |
|
Basic customs duty [10% of A] (B) |
1,20,000 |
|
Social welfare surcharge[10% of B](C) |
12,000 |
|
Transaction value [A + B + C] (D) |
13,32,000 |
|
IGST [12% of D] (E) |
1,59,840 |
|
Total customs duty [B + C + E] |
2,91,840 |
Illustration: 6
X
Ltd imported goods from USA for Rs 50,000. After damage these goods valued by
customs officer is Rs 10,000. Total Customs duty on the value of imported goods
levied Rs 6,180. Imported goods had been damaged after the unloading of goods
in India but before their examination for assessment by customs authorities,
and such damage is not due to any wilful act of X Ltd. Find total duty payable
by X Ltd.
Solution: 6
|
Duty on damaged
goods (i.e. total duty payable by X Ltd.) = |
|
Duty on goods
before damage × [(Value of damaged or deteriorated goods) ÷ (Value of goods
before damage or deterioration)] |
|
= Rs 6,180 ×
(10,000 ÷ 50,000) |
|
= Rs 1,236 |
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